Based on today's action, I am now leaning towards the highest probability is that we nail the top of the blue channel here, with maybe a slight fake breakout tomorrow or Monday, and then head back down to the bottom again. So, I'm leaning towards this correction (if that's all it is) not being completed yet.
At this point though, I'm only 60/40 that we head back down, the scale has not tipped that much, but if we climb up 3-4 points tomorrow, it wouldn't be a bad place to go short again with a tight stop to protect from a breakout.
Tomorrow is OPEX (options expiration for non-options folks), so I wouldn't expect to many fireworks tomorrow. It would be classic for a market to really make a major turn on an OPEX and have a major move, I've seen it happen at major tops quite a few times, but I do not expect that tomorrow. IF this is a major top that has been forming, as opposed to we haven't quite yet topped out, it takes a lot of time. Remember after we topped in 2007, the market fuddled around only losing about 15% over the next year until the real collapse came very suddenly after a death cross and getting under the 200 dma. We don't have a death cross and we aren't even close to the 200dma, so realize there is lots of time still to build this top before a collapse occurs, and it will eventually. The market will tell us when it's near.
Here is updated chart with the current larger channel (blue) and smaller channel (red) you can see we failed today at the red channel, which is a bad sign for breaking out of the blue channel. Also note on the chart that the Stochs are very overbought and the MACD and RSI are rolling over;
How about Linked In today (LNKD)? Internet bubble much? That is what happens in this market when nobody can go short to balance the trade. It goes straight up to a point that an IPO is trading at 1200 P/E. That is super high even for the Internet bubble. The scramble to put money into something is really at a fever pitch here.
If you are a retired person with 800K in savings to live off of, you would be doing great with interest rates up around an historical average of 6% and you could get a comfortable 5% out of CD giving you an income of 40K a year without draw down. But with CD's at 2.5% and savings accounts at ZERO.. the BEST you could do is maybe 15-20K a year, off 800K!!!. This is where the cash buyers for rental property is coming from, in case you were wondering where all the cash buyers showed up out of nowhere. If you are afraid of the stock market and only can get 2% from a CD.. you might reluctantly become a landlord.
Now expand that general principal to Pension funds, Trust Funds, General Funds, anything that NEEDS 6-8% a year safely in order to maintain long term goals. They can't get that 6-8% safely. They're being pushed, much like retiree's, into riskier assets because they have no choice. This is what Ben Bernanke is doing, he is forcing them to take on more risk.
Does anyone think it's smart to force retiree's, pension funds, trust funds, and general funds into riskier assets???
NO!, of course not. This spells one thing... pending disaster during the next market sell off.
Tomorrow I will do some detail on how to technically spot a market roll over well ahead of time. Because sometime in the next year, we will be in the midst of one.
GL
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